I don't like being a downer, but for the past year or so, that's been an unavoidable hazard of digesting the month's news. So it's nice to see a month like July, which has ushered in plenty of good news for the biotech sector. Witness a continuing uptick in financings--real, public secondary offerings, plus some private placements. It wasn't long ago that CEOs pretty much had to go to donate plasma or host a bake sale if they wanted to raise cash for their companies. Then there are some high-profile drug approvals, some positive clinical news, a friendly face at NIH, and some nice deals. Ah, summer!

But much of this pales in comparison to the big news on Capitol Hill, where legislators on the Senate Health, Education, Labor and Pensions Committee recently approved a follow-on biologics bill giving innovator companies a big 12 years of exclusivity. It will now join the larger healthcare reform bill working its way through the Senate. The Biotechnology Industry Organization officially wanted more, of course, but they have to be mighty pleased with this outcome. The Obama Administration favors just seven years as representing a "generous compromise" between industry's desires and the determination of the Federal Trade Commission that innovators don't actually need much of anything in the way of additional exclusivity. But it seems unlikely that the 12-year provision will be a deal-killer if it is in a bill that ultimately reaches his desk.

Mind you, this fight isn't over. House Energy and Commerce Committee Chairman Henry Waxman still backs a five-year period, but Rep. Anna Eshoo (D-CA) is taking the fight for a longer exclusivity period to the House, with a showdown between Waxman's approach and her more widely sponsored bill perhaps taking place by the time you read this.

Personally, I think biotech companies are very, very lucky to score this kind of exclusivity. Follow-on biologics involve a lot of complexity that will limit the number of competitors (as the Federal Trade Commission pointed out last month) and that make them more amenable to add-on patents that can extend monopolies. And there are other reasons while biologics, in my opinion, deserve less rather than more exclusivity than conventional drugs. But it's also probably not quite as big a deal as both sides are making it out to be, since exclusivity after all runs concurrently to patent protection, and in most cases patents should provide the greater protection.

In any case, a follow-on biologics bill is closer to reality now, and it will be interesting to see how this space opens up. Right now, a handful of companies look well-positioned--Teva and the Sandoz division of Novartis, most notably. But Merck has been looking to get involved with its acquisition of a follow-on biologic portfolio from Insmed. It seems likely that most conventional generics companies won't be able to compete in this brave new world.